Global risk triples in two decades

LONDON: A new index from the UK's Chartered Institute of Purchasing & Supply (CIPS) says risk to the world's supply chains has tripled since 1994.

CIPS cites the onset of globalisation, the economic crash of 2008 and subsequent Euro crisis for a rise in the score from 23.7 to 79.8 today.

Developed with the help of Dun & Bradstreet (D&B), the index highlights the disparity of risk amongst developing countries often grouped together such as BRIC and MINT (Mexico, Indonesia, Nigeria, Turkey). So while BRIC members China and India have remained a medium risk, Russia has consistently posed a high risk to businesses and economies that rely on its oil and gas exports. Likewise Mexico, a medium risk for the past 20 years, is compared to Nigeria that continues to be a high risk with Turkey and Indonesia fluctuating between the two.

CIPS says sanctions on Russia's energy sector would result in significant cost to European companies as the country remains responsible for half of Eastern Europe and Central Asia's supply chain risk in 2014.

Noting a "serious skills gap as inadequately trained supply chain professionals try to assess risk in an increasingly globalised world," CIPS says its quarterly index will provide companies with an insight three or four tiers down supply chains.

David Noble, CIPS group CEO commented: "The resurgence in the global economy depends very much upon the reliability of global supply chains. With political instability across the developing world, it is vital that businesses and economies recognise the risks to their supply chains and make the appropriate provisions before it is too late."

Lee Glendon, a D&B supply chain risk specialist, added: "Turmoil in the Ukraine and potential contagion to supply chains in Russia have dominated the headlines recently and for some companies it is only when the event occurs that they look to understand its impact and develop alternative supply options."

A meeting of G7 energy ministers in Rome recently agreed to reduce dependency on Russia that supplies 30 percent of Europe's gas – with 40 percent of it delivered via the Ukraine. Meeting with his counterparts from the U.S. Germany, Canada, France, Italy and Japan, UK energy minister Ed Davey was reported as saying: "We have taken a strategic decision and will face up to the use by Russia of energy as a weapon. Putin has crossed a line."

CIPS notes "encouragement can be drawn" from a reduction in supply chain risk in Q1 2014 following improved economic prospects in Germany, USA and the UK.